Increase in inventory of unsold homes, prices, mortgage rates and supply of rental units all expected to contribute to slowdown in starts, sales, Canada Mortgage and Housing Corp. forecasts.

OTTAWA—The Canadian housing market is expected to moderate over the next two years, Canada Mortgage and Housing Corp. said Monday it its fourth-quarter outlook.

A rise in the inventory of unsold homes, higher prices and mortgage rates and an increase in the supply of rental units are all expected to contribute to the slowdown.

CMHC chief economist Bob Dugan says the gains in provinces such as Ontario and B.C. have offset the slowdown in oil-producing provinces such as Alberta.

“We expect, however, that this counterbalancing effect will decrease over time,” Dugan said.

“As such, housing starts and MLS sales are projected to moderate in 2016 and 2017.”

The Canadian housing market has been a key concern for economists as household debt has risen to record levels in relation to income.

Low interest rates have helped fuel sales and driven prices in many markets.

But CMHC expects interest rates to rise gradually, starting late next year.

For 2015, CMHC said housing starts are expected to range between 162,000 and 212,000 units, with a forecast of 186,900 units.

Housing starts are expected to slip in 2016 to a range of between 153,000 and 203,000 units, with a forecast of 178,150 units, slowing to between 149,000 and 199,000 units, with a forecast of 173,650 units, in 2017.

Sales through the MLS system are expected to range between 444,000 and 546,000 units this year with a forecast of 494,700 units. In 2016, sales are forecast to range from 425,000 to 534,000 units with a forecast of 479,500, and from 416,000 to 536,000 units in 2017 with a forecast of 476,000.

The average MLS price is forecast to be between $417,000 and $459,000 this year with a forecast of $437,700 before rising to between $420,000 and $466,000 in 2016. The average price in 2017 is expected to be in a range between $424,000 and $475,000.